Why You Don’t Need 20% Down Anymore

Here’s the truth behind down payment requirements in real estate.

Last night, I had a conversation with a seller who was under the impression that buyers needed 20% down to purchase a home. In reality, FHA financing buyers can purchase homes for 3.5% down, and VA loans for veterans don’t require a down payment at all.

However, ultimately, 20% down is the goal as a homebuyer because it will save you money on your monthly payment. You won’t have to pay for private mortgage insurance if you put 20% or more down. Any less, and you’ll have to pay PMI. The VA and FHA can offer these low down-payment options because their loans are insured and backed by the government.

"If you work with the right lender, you’ll be on the right path."

The moral of the story is that you should talk to your lender about your options. If you can save up for that 20% down payment, it might be worth putting off your purchase for a few months. However, if you want to take advantage of interest rates now before they go up again, you can purchase a home via several different great mortgage products out there.

As an FHA or VA buyer, it may be harder to find a home in this market. If you work with the right lender, however, you’ll be on the right path. I recommend interviewing multiple local lenders, and I’d be happy to provide references.

If you want a recommendation for a great local lender or have any real estate-related questions, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.

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